Trusts slide as mar­kets re­main in dol­drums

The Weekend Australian - Review - - Primespace - JOHN FREED­MAN AN­A­LYST

AUS­TRALIA’S listed prop­erty stocks fell 5.6 per cent in Fe­bru­ary, lag­ging the broader share mar­ket ( by 4.9 per cent) for the sixth con­sec­u­tive month. Listed prop­erty trusts have trailed the broader mar­ket over three- month ( down 10.6 per cent), six- month ( down 18.9 per cent), one- year ( down 26.4 per cent), fiveyear ( down 9.2 per cent) and 10- year ( down 2.5 per cent) pe­ri­ods.

Its was a dif­fi­cult month again, with the re­port­ing sea­son do­ing noth­ing to im­prove in­vestors’ con­fi­dence.

A num­ber of trusts re­duced or cut dis­tri­bu­tions fore­casts, in­clud­ing Mac­quarie Coun­try­Wide, GPT, APN Euro­pean Re­tail trust, Allco’s Record Re­alty and all three Ru­bi­con ve­hi­cles ( Ru­bi­con Amer­ica, Ru­bi­con Ja­pan and Ru­bi­con Europe).

More broadly, global eq­ui­ties strug­gled to make any head­way, weighed down by re­newed fears about the health of the US econ­omy fol­low­ing a string of weak data, start­ing with the worst non- man­u­fac­tur­ing In­sti­tute for Sup­ply Man­age­ment read­ing in more than six years. In do­mes­tic eco­nomic news, the Re­serve Bank lifted the cash rate 25 ba­sis points to 7 per cent at its meet­ing in early March.

This was widely ex­pected, with the bank not­ing that a ‘‘ sig­nif­i­cant slow­ing in de­mand from its re­cent pace is likely to be nec­es­sary’’ to con­tain in­fla­tion.

The bank had al­ready raised rates in Fe­bru­ary and, af­ter the March state­ment, the mar­ket priced in the in­creas­ing like­li­hood of more in­ter­est rate rises to come.

An in­crease in in­ter­est rates will clearly put more pres­sure on home prices ( par­tic­u­larly in west­ern Syd­ney sub­urbs) which will put fur­ther un­der­mine the new home build­ing sec­tor.

Hous­ing sup­ply is tipped to re­main well be­low un­der­ly­ing de­mand in the near term.

Coun­ter­ing this is the con­tin­ued in­crease in rents, which may at­tract in­vestors back into the res­i­den­tial mar­ket.

In­ter­state mi­gra­tion is also set to slow as the sharp price ap­pre­ci­a­tion in Perth and Bris­bane has meant that most Aus­tralian cities are now equally un­af­ford­able.

On the cur­rency, the Aus­tralian dol­lar sky­rock­eted in Jan­uary to US94c on ris­ing in­ter­est rate dif­fer­en­tials rel­a­tive to the US.

Newspapers in English

Newspapers from Australia

© PressReader. All rights reserved.